Social Security Benefits: What to Expect in Retirement

4 May 2025

Retirement is a phase of life that many people dream about—relaxing without the stress of daily work, enjoying hobbies, and spending time with loved ones. But let’s be real: financial security in retirement is a big deal. One of the key pillars of retirement income for most Americans is Social Security benefits.

If you’re counting on Social Security to support you during your golden years, it’s crucial to understand exactly what to expect. How much will you get? When should you start taking benefits? Are there any pitfalls to avoid? Don’t worry—I’ve got you covered. Let’s break it all down in simple, easy-to-digest language.

How Do Social Security Benefits Work?

Before we dive into specifics, let's get a basic understanding of how Social Security retirement benefits function.

Social Security is a government program designed to provide financial assistance to retirees, disabled individuals, and survivors of deceased workers. Throughout your working years, you pay into the system through payroll taxes (those pesky deductions you see in your paycheck). Then, when you retire, you start receiving monthly payments based on how much you contributed.

Sounds straightforward, right? Well, there are a few key factors that determine how much you’ll actually receive.

How Are Your Benefits Calculated?

The amount of Social Security benefits you’ll receive isn’t just a random number—it’s calculated based on:

1. Your Earnings History

The Social Security Administration (SSA) looks at your 35 highest-earning years to calculate your benefits. If you worked less than 35 years, they’ll count some years as zero, which can lower your payment.

2. Your Full Retirement Age (FRA)

Your Full Retirement Age (FRA) depends on your birth year:

| Birth Year | Full Retirement Age (FRA) |
|---------------|----------------------|
| 1943-1954 | 66 |
| 1955 | 66 and 2 months |
| 1956 | 66 and 4 months |
| 1957 | 66 and 6 months |
| 1958 | 66 and 8 months |
| 1959 | 66 and 10 months |
| 1960 & later | 67 |

If you claim benefits before your FRA, your monthly payments will be permanently reduced. If you delay past your FRA, your benefits increase until you hit 70.

3. When You Start Claiming Benefits

Here’s where timing plays a huge role. You can start claiming Social Security as early as age 62, but there’s a catch—your monthly payout will be significantly lower than if you wait until your FRA or later.

- Claiming at 62: You could lose up to 30% of your benefits.
- Claiming at FRA (66-67): You’ll get 100% of your benefit.
- Claiming at 70: Your benefit increases by about 8% per year after FRA due to delayed retirement credits.

So, is it better to claim early or wait? It depends on your financial situation, health, and whether you need the money immediately.

Can You Work While Collecting Social Security?

Thinking about working in retirement? You can, but if you claim Social Security before your FRA and earn above a certain limit, your benefits may be temporarily reduced.

- In 2024, if you're under FRA and earn more than $22,320, Social Security will withhold $1 for every $2 you earn above the limit.
- The year you reach FRA, the limit increases to $59,520 (Social Security will withhold $1 for every $3 above this amount).
- Once you hit FRA, you can earn as much as you want without any penalty.

Are Social Security Benefits Taxed?

Many retirees are surprised to learn that Social Security benefits can be taxable—yep, Uncle Sam still wants his cut. The amount you owe depends on your provisional income (your adjusted gross income + nontaxable interest + half of your Social Security benefits).

Here’s how much might be taxed:

- Individual filers:
- If your income is $25,000 - $34,000, up to 50% of your benefits may be taxed.
- If your income is above $34,000, up to 85% may be taxed.

- Married couples filing jointly:
- If income is $32,000 - $44,000, up to 50% of benefits may be taxed.
- Over $44,000, up to 85% may be taxed.

So, while Social Security helps with retirement, it’s not entirely free money!

Will Social Security Run Out?

One of the biggest concerns people have is whether Social Security will last. You’ve probably heard rumors that the Social Security Trust Fund is running out of money—but what’s the real deal?

Here’s the truth: The Social Security Trust Fund is projected to be depleted by 2034, according to the latest estimates. However, this doesn’t mean Social Security will disappear. Even if the trust fund runs out, Social Security will still be able to pay about 77% of scheduled benefits through payroll taxes.

That said, Congress will likely need to make some changes—such as raising the retirement age, increasing taxes, or adjusting benefits—to keep the program sustainable.

Should You Rely Solely on Social Security?

Short answer? No.

Social Security was never designed to be your primary source of income in retirement. On average, it replaces only about 40% of pre-retirement earnings. That’s probably not enough to maintain your current lifestyle, especially with rising healthcare costs and inflation.

So, what should you do?
- Save independently: Contribute to a 401(k), IRA, or other retirement accounts.
- Reduce debt: Enter retirement with as little debt as possible.
- Consider other income sources: Investments, part-time work, or rental income can help bridge the gap.

Final Thoughts

Social Security benefits are a lifeline for retirees, but they’re not a magic solution. Understanding how benefits are calculated, when to claim them, and how they’re taxed will help you make smarter financial decisions.

The key takeaway? Plan ahead. If you rely solely on Social Security, you might find yourself struggling later in life. But by saving, investing, and budgeting wisely, you can enjoy a comfortable, stress-free retirement.

So, what’s your retirement game plan? It’s never too early—or too late—to start thinking about it.